Rent stabilization is legal, but will it work to help residents at the mercy of landlords seeking the highest possible return on their Maui property investments? That’s the question left hanging after Maui County Council members heard Monday evening from more than two dozen testifiers, most of whom favored putting brakes on runaway rental costs.

Members of the Council’s Housing and Land Use Committee, chaired by Council Member Tasha Kama, heard four presentations and about two hours of public testimony. The committee also received dozens of written testimonies, mostly in favor of controlling rising rents.

Kama deferred further committee discussion on rent stabilization until 9 a.m. Sept. 26.

Before Monday’s meeting, Deputy Corporation Counsel Michael Hopper said the Council has authority to enact rent stabilization. Under Hawaiʻi law, “each county shall have the power to regulate the renting, subletting, and rental conditions of property for places of abode by ordinance.”

When specific legislation is proposed, more analysis would be needed, Hopper said.

At the end of Monday evening’s meeting, Kama was asked whether she would propose legislation—she said she would “at some point in time.”

That’s not helpful for residents facing skyrocketing rents.

“We need mandatory rent stabilization now. Not in the near future. Tomorrow is already too late,” said Desilee Santiago, a tenant and Maui Tenants and Workers Association member. “We have been dealing with an eviction proceeding against us from our landlord, wanting more money. When everybody was getting tens of thousands for their rental, he thought he would jump on that bandwagon and displace local families to house displaced local families.”

Santiago said she and her family have already moved out of their former rental and into a new one, paying more than two-and-a-half times more. And, it’s inconvenient.

“It’s further away,” she said. “My son doesn’t have a bus, so we have to take him and pick him up from school. It’s really turned our lives upside down in the last six months.”

Association member and Lahaina fire survivor Krizhna Bayudan still faces housing instability.

“Stable housing is directly tied to mental well-being, and I empathize with the entire island, which has seen extreme rent hikes in the aftermath of last year’s tragedy,” Bayudan said. “More and more residents are being forced to leave Maui, and our island is changing. Soon, my family and other Lahaina fire affected families will also have to compete for stable housing as our insurance rent coverage comes to an end. We need solutions now.”

According to the tenants association, monthly rent for two-bedroom homes on Maui range from $3,000 to $11,000, fueled by federally subsidized and insurance assistance rents for displaced wildfire survivors. For a household with an annual income of $88,249, affordable rent of about 30% of that income would be $2,206 per month, the association said.

The association proposes controlling rents by first establishing a base rent that could only be increased annually by small amounts tied to the Consumer Price Index. If landlords believe they need to raise rent beyond the index cap (for major repairs, for example), then they could apply to the county Department of Housing for approval.

Also, under the rent stabilization law, landlords would be required to register their rental properties with the County, which would ensure compliance with rules and assist with tracking rentals and housing availability, according to the association.

Equity One Real Estate President and Chief Executive Officer Leil Koch, representing the Realtors Association of Maui, said rent controls don’t work and have the opposite intended effect in communities that have tried it. He pointed out that rent controls are prohibited in 33 states, including Washington, Arizona, Florida, Massachusetts and Minnesota.

“Rent control reduces, actually reduces, available housing,” he said. “The number of total rental units in Cambridge and Brookline, Massachusetts, fell by 8% and 14% (respectively) after those cities imposed stringent rent controls.”

Rent control contributed to the gentrification of San Francisco, contrary to what was intended by legislation for that city, he said.

“Tenants may also suffer from fewer options of rental type and location, meaning that as the funnel gets smaller for potential rental units you lose the ability to have your choice of studio, one bedroom, two bedroom, Upcountry and everywhere else,” Koch said.

A rent control program would come with significant administrative costs for Maui County, he said.

For property owners, as their rental income gets fixed, their homeowners’ association fees and insurance costs continue to go up, Koch said.

Developers will not build new housing if there are constraints about their return on investment, he said. Then, there would be job losses in janitorial and landscaping companies, he added.

And, he said, Maui County would lose property tax revenue, which would impact money available for county services.

“If you do this thing, it’s a downward spiral,” he said. “You’re gonna kill all the rentals.”

Koch suggested alternatives, including: streamlining Maui County permitting processes; increasing rental subsidies; continuing tax incentives for landlords who offer long-term rentals, especially for low and very low income tenants; providing fast-tracked, pre-approved plans for new housing developments; carrying out zoning reform to permit multiple units in all districts and eliminating minimum lot sizes; and encouraging the county to purchase existing housing units, buildings and vacant offices to create immediate available rentals.

Attorney and housing policy expert Jason Economou, former government affairs director for the Realtors Association of Maui, agreed with Koch’s alternatives, but disputed what he called some of his “scary language.”

While it’s true that rent controls reduce the availability of housing, “that’s because one of the ‘consequences’ of rent controls is that people don’t move as often,” Economou said. “So there’s less turnover in housing. It keeps people staying in one place.”

Also, there’s a difference between what economists refer to as “pure rent control,” which is a “hard cap or stop on increasing rentals,” versus rent stabilization, he said.

Economou also agreed with Koch that there are significant administrative costs for implementing a rent stabilization program, and he questioned the feasibility of tasking the fledgling Housing Department (not yet fully operational or staffed now) with “a whole new task of determining rents for every rental on the island.”

“Then, we have to create new technology to register every rental in the island,” he said. “And then you’re telling people that you’re not going to use this registration information for building code enforcement. But, the truth is, the owners aren’t going to trust you. They’re not going to trust that the county won’t use these rental registrations to enforce the building code infractions, so you have an uphill battle to get any semblance of this program off the ground.”

In an email to Maui Now, Economou said he still thinks rent stabilization should be considered, but as part of a multifaceted approach.

“Some of the other facets should focus on the preservation of inventory for local residents, as well as incentives/disincentives to guide preferrable models of ownership,” he said. “For example, I think rental units owned by corporate entities or offshore owners, where the property is primarily managed by property management companies, should be taxed at a substantially higher rate than locally owned or owner-occupied rentals.”

Economou also suggested establishing an incentive program for local owners to voluntarily place deed restrictions on their own properties to enable their properties to be sold down the line only to people with an established Maui County work history.

“These are potentially easier and less expensive programs to administer, but could have a long-term beneficial effect on rental rates,” he said.

In a Sept. 13 letter, Kama said she’s considering an alternative to rent stabilization: setting lower property tax rates for landlords who provide long-term rentals of at least 12 months to residents if rents are affordable to households making 140% and below median income and cap rents at amounts published annually in the Department for Housing’s Affordable Rental Housing Program.

The department would review the leases and other documentation, including information that demonstrates the renter’s qualifying income to ensure compliance.